Posts tagged ‘Fortune Minerals Ltd (FT)’

In an effort to placate a native band, Fortune Minerals TSX:FT and POSCO Canada have sold their British Columbia coal licences to BC Rail, a provincially owned railway company without a railway. Announced May 5, the $18.3-million sale of 61 claims totalling 16,411 hectares in northwestern B.C. contains a 10-year buy-back option should the Tahltan First Nation agree to development of the Arctos anthracite project.

A 2013 company photo shows environmental field work underway. As project operator, Fortune continues with land reclamation at Arctos.

Calling the deal a good outcome in the current market, Fortune president/CEO Robin Goad said the joint venture “invested significant funds” to try to resolve the band’s concerns. “Mining is a cyclical industry and, considering the weak metallurgical coal prices at the present time, it was considered prudent to step back from Arctos and focus our efforts on our near-term production assets.”

A PwC report on B.C. mining, also released May 5, noted that steelmaking coal now trades around $100 per tonne, “a considerable drop from its record price around $330 in 2011.” The report quotes Don Lindsay of Teck Resources TSX:TCK.A and TCK.B saying prices can’t recover without further production cuts around the world.

Fortune and the South Korean steel producer subsidiary will divide the proceeds evenly, with Fortune allocating its share to working capital and debt repayment. The company operates the Revenue silver mine in Colorado and holds the proposed NICO gold-cobalt-bismuth-copper mine in the Northwest Territories, along with exploration projects in the NWT.

CN TSX:CNR took over BC Rail’s railway system in 2004 in a highly controversial $1-billion deal that the province insisted was a lease, not a sale. Once the deal was complete, the BC Liberal government acknowledged the lease would run for 990 years. Corruption allegations and a police raid on B.C.’s legislature followed. In 2010 the province paid $6 million in legal bills for two government aides who pleaded guilty to corruption-related charges.

Although BC Rail no longer has a railway to run, the government kept the Crown corporation intact with management, board of directors and staff responsible for maintenance of a 40-kilometre spur line and property sales.

His tone sounded taunting, if only slightly so. While attending a meeting of resource politicos in Sudbury last August, Northwest Territories minister of Industry, Tourism and Investment David Ramsay told the Globe and Mail that the NWT’s “Ring of Ice” has resources to rival Ontario’s Ring of Fire. The huge difference, of course, is that the Ring of Fire remains all but inaccessible while the NWT’s riches have already been opened up. Now the territory has taken specific measures to emphasize it’s open for business.

That came through in the first annual implementation plan of the NWT’s Mineral Development Strategy. And the plan drew praise in an October 6 announcement from the NWT and Nunavut Chamber of Mines. The organization sees last April’s devolution of federal responsibilities for land, water and resources to the territory as a turning point for the industry. “The legislature has said mining development has big consequences for our government now,” chamber executive director Tom Hoefer tells ResourceClips.com. “So it’s saying we’re going to be more nimble on our feet, we’re going to encourage economic development.”

The NWT has done so by setting ambitious goals, some with established budgets and target dates, on a number of fronts including energy, transportation and a “new leading edge Mineral Resources Act.” That marks a major departure from past practice, according to Hoefer.

“We’ve suffered a loss of reputation over probably the last seven years. If you look at our exploration figures during that period you can see our investment just flatlined. We saw Yukon, Nunavut and the rest of the world getting huge investment. We languished.”

“A big piece of this was the regulatory front,” Hoefer explains. “It was getting very complex, in part because we had a number of different land claim groups and that created a number of different regulatory boards. So the federal government launched a northern regulatory improvement initiative in 2009 and that culminated in amendments to the Mackenzie Valley Resource Management Act.” That was completed shortly before last April’s devolution milestone.

The NWT considers those amendments a starting point for a new regulatory environment. But the government’s not promising rapid reform. Calling this a “time of transition and learning,” the territory has come up with the slogan “devolve then evolve.” Still, it’s stated intentions to provide clear, concise documentation and to guide companies through regulatory processes and aboriginal engagement.

The territory already leads Canada in at least one respect, Hoefer maintains. “I’d say we’re probably a leader in the country for settling land claims. That helps provide more certainty.”

Devolution also brings the territory 50% of the royalties that once went solely to the feds. Aboriginal groups that signed onto the devolution agreement get 25% of the territory’s share, Hoefer says.

With grants announced just last week, a new mining incentive program has awarded a total of $396,000 to two prospectors and six exploration companies.

“A new and easier-to-use web portal for discovery and dissemination of geoscience information” will get $1.3 million over two years.

But that’s small change compared to price tags for infrastructure. Although money hasn’t been allocated yet, the NWT’s talking about a three-year, $31-million energy program and a 10-year, $200-million transportation plan.

None of the territory’s four existing mines connect to the grid. Only North American Tungsten’s (TSXV:NTC) CanTung operation has year-round road access—and that links to the Yukon.

On July 19 Fortune announced its proposed NICO gold-cobalt-bismuth-copper mine and mill received federal, territorial and native approval. By accepting the positive environmental assessment released by the Mackenzie Valley Review Board in January, three levels of government have allowed NICO to move towards water licensing, as well as land use and construction permitting. Given further approvals, not to mention financing, Fortune hopes to start construction next year on an open pit/underground operation 160 kilometres north of Yellowknife that could last nearly 20 years.

Although surrounded by a wildlife reserve, Canadian Zinc’s development has progressed through the NWT’s regulatory regimen.

Also recommended for approval by the Mackenzie Valley Environmental Impact Review Board was Gahcho Kué, described by its proponents as “the world’s largest and richest new diamond mine development.” Located 280 kilometres northeast of Yellowknife, it’s a 51%/49% joint venture of De Beers Canada and Mountain Province. The board’s recommendation, however, comes with conditions to prevent potentially adverse environmental effects. The federal minister of Aboriginal Affairs and Northern Development makes the final decision. In a statement accompanying the JV’s July 22 news release, De Beers COO Glen Koropchuk said his company’s reviewing the measures and follow-up programs recommended by the board. “We look forward to proceeding to the next stages in the regulatory approval process,” he added.

One week later Avalon announced it too received the MVEIRB’s recommendation, again subject to certain conditions “to mitigate the predicted impacts so that they are no longer significant.” In April the company’s Nechalacho rare earth elements project, about 100 kilometres southeast of Yellowknife, achieved the “first feasibility-level study to be completed on a major heavy rare earth project outside of China,” the company stated. Avalon maintained its resources might support 90 years of production “if the mining rate is unchanged and mineral resources are converted to mineral reserves at the same conversion rate experienced” in the feasibility. Applications for a water licence and land use permits continue, as do “efforts to finalize its aboriginal agreements, secure product off-take agreements, identify strategic partners and secure project financing.”

On July 8 Canadian Zinc announced the Mackenzie Valley Land and Water Board had recommended approval of a Type A water licence, “the key regulatory permit needed for the construction, development and operation” of its Prairie Creek zinc-lead-silver mine. Located about 500 kilometres west of Yellowknife, the project has been surrounded by the Nahanni National Park Reserve since the park’s six-fold expansion in 2009. Prairie Creek received environmental approval in June 2012. Already in place are a 1,000-tonne-per-day mill, five kilometres of underground workings, a surface fleet and an airstrip.

The four announcements were welcomed by the NWT & Nunavut Chamber of Mines. In a July 27 statement chamber president and De Beers director of external and corporate affairs Cathie Bolstad said, “While the minerals industry is currently facing significant financial and commodity price challenges globally, the continued advancement of these and other significant northern projects helps invite investment to the Northwest Territories and Nunavut. This will help sustain and grow our industry, which is a significant provider of economic opportunities and benefits to northern residents and Canada.”

Effective April 2014, responsibility for NWT onshore resource development will shift from the federal to the territorial government. Public land ownership will also be transferred, while resource royalties will be shared. At last count the territory’s population stood at 43,407.

Fortune Seeks Partners as it Moves to Production

By Greg Klein

With two projects slated for production within 12 months of each other, the year 2014 should be a big one for Fortune Minerals Ltd TSX:FT. The projects are diverse—gold, cobalt, bismuth and copper at NICO in the Northwest Territories and anthracite coal at Mount Klappan in northwest BC. Both projects have been test-mined. Much of the infrastructure is either in place, on its way or in storage. Additionally, as President/CEO Robin Goad explains, the company intends to recruit deep-pocketed partners to reduce equity dilution.

Last August, Fortune teamed up with South Korea’s POSCO in a JV that gives the world’s third-largest steel producer a 20% interest in Mount Klappan. Fortune gets an estimated $181 million in return, with $30 million up front, to develop the mine and a rail connection. POSCO will fund 20% of operating costs and receive 20% of production from one of the world’s largest undeveloped anthracite deposits.

Mount Klappan’s four deposits total 107.9 million tonnes coal measured, 123 million tonnes indicated and 359.5 million tonnes inferred. Its Lost Fox deposit has a reserve of 85.6 million tonnes proven and 16.1 million tonnes probable. After wash-plant processing, that reserve translates into 51.6 million tonnes proven and 9.2 million tonnes probable reserves of the 10% ash pulverised coal injection (PCI) product used in steelmaking.

Last November’s feasibility study projects a $768.4-million CAPEX for the first four years of a minimum 20-year lifespan for an open pit producing an initial three million tonnes a year.

Based on a price of $175 per tonne PCI, the study projects a pre-tax IRR of 25.4% and an 8% discounted NPV of $1 billion. At $300 a tonne, the study projects a pre-tax IRR up to 60.2% and an 8% discounted NPV up to $ 3.8 billion.

The transportation plan entails building tracks on an existing CN rail bed to the main line 150 kilometres away, which connects with the Ridley Coal Terminal at Prince Rupert, gateway to Asia.

Electricity should be on its way to the region, with BC Hydro’s 344-kilometre transmission line expected for completion in 2013.

“Our POSCO agreement puts money in place to take Mount Klappan through permitting, detailed engineering and some additional work,” says Goad. “At the same time we’re working closely with the community, where we have very significant support, and on finding an additional minority partner that will fund the project into commercial operation.”

Fortune seeks a JV partner for NICO too. “Our plan is to fully finance both projects right through to commercial operation with minimal equity dilution,” he explains.

NICO has underground and open-pit proven and probable reserves of 907,000 ounces gold, 82 million pounds cobalt, 109 million pounds bismuth and 27 million pounds copper. The project’s 2008 feasibility study, however, is out of date.

“We’re now completing front-end engineering and design. We’re going to come out with a new financial model, and we’ll have a new reserve estimate coming out very shortly. At the same time, we’re completing the permitting process and working very hard on community engagement.” Goad says.

A key aspect of the project is the plan to ship concentrate to the company’s refinery in Saskatchewan. “NICO will be using a very simple flotation concentration process to reduce 4,650 tonnes of ore per day to only 180 tonnes of concentrate. That means only five truckloads of material, just 3.7% of the original mass, will leave the NICO site for Hay River each day. That’s a critical economic attribute.”

Both projects have been test-mined; both projects have been assessed in positive bankable feasibility studies; both have been pilot-plant processed —Robin Goad

From Hay River, concentrate will travel by rail to Fortune’s Saskatchewan Metals Processing Plant near Saskatoon. The refinery will offer much lower costs for power, production and labour than could be found in the NWT.

At this advanced stage, NICO might be described as a mine in waiting. It’s also a mine in storage. Fortune has bought and dismantled Newmont’s TSX:NMC Golden Giant Mine buildings, metallurgical labs and other infrastructure, with the intention of shipping and reassembling them at NICO. Goad says the Golden Giant transplant offers another de-risk benefit.

“The Tlicho [aboriginal] government is generally very supportive of our project,” Goad says. The environmental review is progressing as well. “We just completed a conformity check on our developments assessment report [with the NWT Mackenzie Valley Review Board], and I think we’re the first company in history to have zero deficiencies.”

Goad concludes, “Both projects have been test-mined; both projects have been assessed in positive bankable feasibility studies; both have been pilot-plant processed. We’ve done things like buy the Golden Giant mine to reduce risks. We’ve not only offer compelling value, but we’ve done a lot to reduce risk in terms of diversifying our assets and the work that we’ve conducted to advance both projects.”

At press time Fortune had 110.79 million shares outstanding at $0.82 a share for a market cap of $90.85 million.